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COMPANY INFORMATION ..............................................................................................................................
DIRECTORS’ REPORT (ENGLISH VERSION).................................................................................................
DIRECTORS’ REPORT (URDU VERSION)......................................................................................................
STATEMENT OF FINANCIAL POSITION ........................................................................................................
STATEMENT OF PROFIT OR LOSS ACCOUNT .............................................................................................
STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME..........................................
STATEMENT OF CHANGES IN EQUITY .........................................................................................................
STATEMENT OF CASH FLOWS.......................................................................................................................
NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS .........................................................
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CONTENTS
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COMPANY INFORMATION BOARD OF DIRECOTRS : Mr. Mikio Bando (Chairman) (Alternate: Mr. Muhammad Taufiq Feroz)
Mr. Hanif Sattar (Director and Chief Executive) Mr. Daisuke Hashimoto Mr. Mehtabuddin Feroz Mr. Suhari Mukti (Alternate: Mr. Sajid Ali Khan) Mr. Noor Muhammad (Independent Director) Mrs. Navin Salim Merchant (Independent Director)
COMPANY SECRETARY : Mr. Muhammad Amin Bashir
AUDIT COMMITTEE : Mr. Noor Muhammad (Chairman) (SUB COMMITTEE OF THE BOARD)
Mr. Daisuke Hashimoto (Member)Mr. Mehtabuddin Feroz (Member)
HUMAN RESOURCES & : Mr. Noor Muhammad (Chairman) REMUNERATION COMMITTEE Mr. Daisuke Hashimoto (Member)(SUB COMMITTEE OF THEBOARD)
Mr. Mehtabuddin Feroz (Member)Mr. Hanif Sattar (Member)
AUDITORS : Deloitte Yousuf Adil (Chartered Accountants)
LEGAL ADVISORS : Hassan & Humayun Associates
BANKERS : Citibank N.A. Bank Alfalah Limited The Bank of Punjab Habib Bank Limited Allied Bank Limited MCB Bank Limited National Bank of Pakistan
REGISTERED OFFICE : 30-B, Sindhi Muslim Co-operative, Housing Society, Karachi-74400 Tel.: 34528651 – 4, Fax: 34549857 E-mail: mamin@otsuka.pk
jnoor@otsuka.pk Web site: www.otsuka.pk
FACTORY : Plot No. F/4-9, Hub Industrial Trading Estate, Dist. Lasbella (Balochistan) Tel.: (0853) 303517-8 Fax: (0853) 303519
SHARE REGISTRAR : M/s. CDC Share Registrar Services Limited CDC House, 99 – B, Block ‘B’, S.M.C.H.S., Main Shahra-e-Faisal Karachi-74400. Tel: Customer Support Services (Toll Free) 0800-CDCPL (23275) Fax: (92-21) 34326031 Email: info@cdcsrsl.com Website: https://www.cdcsrsl.com
03
Board Committees
SUB COMMITTEE OF THE BOARD
NAME OF MEMBER
Audit Committee Mr. Noor Muhammad (Chairman) Mr. Daisuke Hashimoto Mr. Mehtabuddin Feroz
Human Resource & Remuneration Committee
Mr. Noor Muhammad (Chairman) Mr. Daisuke Hashimoto Mr. Mehtabuddin Feroz Mr. Hanif Sattar
CATEGORY NAMES GENDER Executive Director Mr. Hanif Sattar (CEO)
MaleDirectors
Non-Executive Directors Mr. Mikio Bando (Chairman) Mr. Mehtabuddin Feroz Mr. Daisuke Hashimoto Mr. Suhari Mukti
Independent Directors Mr. Noor Muhammad Mrs. Navin Salim Merchant
- s
i s
FemaleDirector
Remuner
The composition of Board of Directors (“the Board”) is as follows:
The Directors are pleased to present accounts of Otsuka Pakistan Limited (the Company) for the first quarter ended September 30, 2019.
Directors’ Report
Business Review:
The results of the quarter were encouraging. Sales for the quarter have increased by 21% as compared to the corresponding quarter of last year due to price increase and curtailment of special discounts for hospitals. Gross profit margin has improved from 23% to 28%. However there was increase in cost of goods sold and administrative expenses by 14% and 15% respectively due to high inflation and increase in cost of utilities.
Selling and distribution expenses were higher by 21% mainly due to increase in freight cost after the amendment in permissible axle load under National Highway Safety Ordinance, 2000. The financial cost of company has surged by 85% as compared to the corresponding quarter which is mainly due to the increase in the discount rates by the State Bank of Pakistan, investments in new products and cost of heavy repairs at factory and warehouses for GMP. (Good manufacturing practices).
The earning per share of the company is Rs. 2.12 per share as compared to an earning of Rs. 0.30 in the corresponding quarter of the last year.
Future Outlook:
The economic conditions of the country have shown a little improvement in this quarter and we are hoping that the government will focus on the growth policies to improve business environment including foreign exchange management. However the global political conditions are still uncertain which may impact our profitability as there is direct link of oil prices with our cost of sales. The directors are confident that the company can achieve its' annual target if the same trend continues during the rest of the period.
On behalf of the Board
Dated: October 22, 2019
Mehtabuddin Feroz Hanif SattarChief Executive Office Director
Karachi
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: اکروابری اجزئہ
ور ااتپسولں ےک ےئل وصخیص راعوتیں ںیم یمک ےک ابثع ذگہتش اسل یک ایس ہس امیہ ےک اس ہس امیہ ےک اتنجئ وحہلص ازفا رےہ۔ وتمیقں ںیم ااضےف ا
ور اپین، دصیف وہایگ ےہ۔ اتمہ ، ارفاط زر ا دصیف ااضہف وہا ےہ۔ ومجمیع انمعف اک امرنج 23 دصیف ےس ڑبھ رک 28 اقمہلب ںیم اس ہس امیہ یک رفوتخ ںیم 21
ور 15دصیف اک ااضہف وہا ےہ۔ ا ور ااظتنیم ارخااجت ںیم ابرتلبیت 14دصیف وتخ دشہ اسامن ا ااضےف یک وہج ےس رف ےک ارخااجت ںیم یلجب ، سیگ
05
اقمےلب ںیم اس ہس امیہ رہ صصح یک آدمین 2.12 روےپ ےہ۔ روےپ ےک ےلھچپ اسل یک ایس ہس امیہ ںیم ینپمک ےک رہ صصح یک آدمین 0.30
: ی شیپ دنب لبقتسم یک
ور مہ ادیم رک رےہ ںیہ ہک وکحتم زرابمدہل ےک ااظتنم تیمس اکروابری اموحل وک رتہب اس ہس امیہ ںیم کلم ےک اعمیش احالت ںیم وھتڑی رتہبی آیئ ےہ ا
ے یگ۔ اتمہ اعیمل ایسیس احالت ایھب یھب ریغ ینیقی ںیہ وج امہرے انمعف وک اتمرث رکےتکس ںیہ ویکہکن لیت یک وتمیقں انبےن ےک ےئل رتایقیت اپویسیلں رپ وتہج د
ر راہ وت ینپمک اسالہن دہف وپرا ےک اسھت ےہ۔ ڈارئرٹکیز وک نیقی ےہ ہک ارگ ابیق دمت ںیم یہی راحجن ربرقا اک رباہ راتس قلعت امہری رفوتخ یک التگ
رکیتکس ےہ۔
اجنمبن وبرڈ
ومرہخ 22اوتکرب ، 2019
ے یٹفیس آرڈسننی 2000 ےک تحت رقمرہ دح ےس ور میسقت ےک ارخااجت ںیم 21 دصیف زایدہ ااضہف وہا ےہ سج یک اینبدی وہج لنشین اہیئ و رفوتخ ا
ہس امیہ ےک اقمہلب ںیم ینپمک یک امیل التگ ںیم 85 دصیف اک ااضہف ری یک التگ ںیم ااضہف اھت۔ زگہتش وبھج ںیم رتمیم ےک دعب امل ربدا ے وہےئ اجتوزالد
ور یج امی یپ )ڈگ ونیم رچکیفگن ، یئن ونصماعت ںیم رسامہی اکری ا وہا ےہ یکسج وہج اٹیٹس کنیب آف اپاتسکن یک اجبن ےس راعیتی رنوخں ںیم ااضہف
ور وگداومں ںیم رمتم یک دم ںیم اھبری ارخااجت ںیہ ۔ ےک اقتوضں وک وپرا رکےن ےئلیک رٹکیفی ا رپسٹکی(
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CONDENSED INTERIM STATEMENT OF FINANCIAL POSITION
AS AT SEPTEMBER 30, 2019
(Audited)(Unaudited)
Sep 30, June 30,
Note 2019 2019
ASSETS
4 351,741 361,696
1,800 1,945
6,949 7,090
1,309 1,309
Non-current assets
Property, plant and equipment
Intangibles
Long-term loans - considered good
Long-term deposits
Deferred tax asset - net 5 144,907 152,547
506,706 524,587
39,444 44,699
559,357 574,810
286,349 249,393
26,436 26,987
41,936 43,251
62,921 55,942
Current assets
Stores and spares
Stock-in-trade - net
Trade debts - unsecured - net
Loans and advances - considered good
Trade deposits, short-term prepayments and other receivables
Taxation - net
Bank balances 4,991 10,975
1,021,434 1,006,057
Total assets 1,528,140 1,530,644
EQUITY AND LIABILITIES
EQUITY
Share capital
Authorised share capital
20,000,000 (June 30, 2019: 20,000,000) ordinary shares of Rs 10 each 200,000 200,000
Issued, subscribed and paid-up share capital
121,000 121,000
(71,931) (97,545)
12,100,000 (June 30, 2019: 12,100,000) ordinary shares of Rs 10 each
Revenue reserves
Shareholders' equity 49,069 23,455
LIABILITIES
6 543,300 557,588
373,648 337,350
7 532,594 583,669
20,326 19,378
Current liabilities
Short-term loan from a related party - unsecured
Trade and other payables
Short-term running finance - secured
Mark-up accrued
Unclaimed Dividend 9,203 9,204
1,479,071 1,507,189
Total equity and liabilities 1,528,140 1,530,644
CONTINGENCIES AND COMMITMENTS 8
The annexed notes 1 to 16 form an integral part of this condensed interim financial information.
-----Rupees in '000-----
07
CONDENSED INTERIM STATEMENT OF PROFIT OR LOSS (UNAUDITED) FOR THE QUARTER ENDED SEPTEMBER 30, 2019
2019 2018Sep, 30 Sep, 30
Note----- Rupees in '000 -----
Net sales 9 534,104 441,554Cost of sales (385,835) (339,128)Gross profit 148,269 102,426
(74,047) ( 61,272)Selling and distribution expensesAdministrative and general expenses (25,632) ( 22,262)
48,590 18,892Other income 17,812 6,194
66,402 25,086 (4,644) (5,645)
61,758 19,441 (20,404) ( 11,046) 41,354 8,395
(15,740) (4,810)
Other expensesOperating incomeFinance costProfit for the period before taxationTaxation - netProfit for the period after taxation 25,614 3,585
Earnings per share - basic and diluted 2.12 0.30
The annexed notes 1 to 16 form an integral part of this condensed interim financial information.
------------ Rupees ---------------
08
CONDENSED INTERIM STATEMENT OF OTHER COMPREHENSIVE INCOME (UNAUDITED) FOR THE QUARTER ENDED SEPTEMBER 30, 2019
2019 2018Sep, 30 Sep, 30
---------------------- Rupees in '000 ----------------------
Profit for the period after taxation 25,614 3,585
Other comprehensive income:
Items that will not be reclassified to profit or lossRemeasurements of defined benefit plan - -
Deferred tax on remeasurements of defined benefit plan - -
- -
Total comprehensive income for the period 25,614 3,585
The annexed notes 1 to 16 form an integral part of this condensed interim financial information.
9
CONDENSED INTERIM STATEMENT OF CHANGES IN EQUITY (UNAUDITED) FOR THE QUARTER ENDED SEPTEMBER 30, 2019
Revenue reserves
121,000 356,500 (274,688) 81,812 202,812Balance as at July 1, 2018
Total comprehensive income for the quarter - - 3,585 3,585 3,585ended September 30, 2018
Balance as at September 30, 2018 121,000 356,500 (271,103) 85,397 206,397
121,000 341,980 (439,525) (97,545) 23,455Balance as at July 1, 2019
Total comprehensive income for the quarter
ended September 30, 2019 - - 25,614 25,614 25,614
Balance as at September 30, 2019 121,000 341,980 (413,911) (71,931) 49,069
The annexed notes 1 to 16 form an integral part of this condensed interim financial information.
---------------------------------------------- Rupees in '000 ----------------------------------------------
Total
Issued, subscribed and paid-up
capitalGeneral reserve
Accumulated losses Sub-total
10
CONDENSED INTERIM STATEMENT OF CASH FLOWS (UNAUDITED) FOR THE QUARTER ENDED SEPTEMBER 30, 2019
Note2019 2018----- Rupees in '000 -----
CASH FLOWS FROM OPERATING ACTIVITIES Profit for the period before taxation 41,354 8,395
Adjustment for non-cash charges and other items: 21,772 21,559 (1,337) (2) 2,377 328
461 42 (7,778) 4,042 (121) -
Depreciation & AmortisationGain on disposal of Fixed Asset-netWorkers' Profits Participant FundCentral Research FundExchange (gain)/loss -netImpairment of trade debts - netMark-up on finances 20,404 11,046
Operating Surplus before working capital changes 77,132 45,410
(Increase) / decrease in current assets
5,255 2,239 15,453 (74,561) (36,835) (3,010)
551 5,265
Stores and sparesStock-in-tradeTrade debts - unsecuredLoans and advancesTrade deposits, short-term prepayments, other receivables 1,315 (9,245)
(14,261) (79,312)Increase/(Decrease) in current liabilities
26,950 (36,165)Trade and other payablesCash generated from/(used in) operations 89,821 (70,067)
(19,456) (10,204) (15,079) (6,605)
141 (32)
Interest paidTaxes paidIncrease / (decrease) in long-term loans receivablesNet cash generated from/(used in) operations 55,427 (86,908)
(14,508) (1,885) 4,172 2
CASH FLOWS FROM INVESTING ACTIVITIES Fixed capital expenditureProceeds from disposal of property, plant and equipmentNet cash used in investing activities (10,336) (1,883)
45,091 (88,791)Net increase / (decrease) in cash and cash equivalentsCash and cash equivalents at the beginning of the period (572,694) (485,147)
Cash and cash equivalents at the end of the period 11 (527,603) (573,938)
The annexed notes 1 to 16 form an integral part of this condensed interim financial information.
QUARTER ENDEDSep-30
11
NOTES TO AND FORMING PART OF THE CONDENSED INTERIM FINANCIAL INFORMATION (UNAUDITED) FOR THE QUARTER ENDED SEPTEMBER 30, 2019
1 LEGAL STATUS AND NATURE OF BUSINESS
2 BASIS OF PREPARATION
2.1 Statement of compliance
2.2 Accounting convention
2.3 Functional and presentation currency
3
3.1
3.2
3.3
Otsuka Pakistan Limited (the Company) was incorporated in Pakistan as a public limited company is listed on the Pakistan Stock Exchange Limited. The registered office of the Company is situated at 30-B, S.M.C.H. Society, Karachi in the province of Sindh, Pakistan. The Company is engaged in the manufacturing, marketing and distribution of intravenous infusions and trading in pharmaceutical products, nutritional foods and medical equipment. The Company is an indirect subsidiary of Otsuka Pharmaceutical Company Limited, Japan.
This condensed interim financial information has been prepared in accordance with the approved accounting standards as applicable in Pakistan for interim financial reporting. The approved accounting standards comprise of such International Financial Reporting Standards (IFRSs) issued by the International Accounting Standards Board as are notified under the Companies Act, 2017, the requirements of the Companies Act, 2017 and the directives issued by the Securities and Exchange Commission of Pakistan (SECP). Wherever the requirements of the Companies Act, 2017 or the directives issued by the SECP differ with the requirements of IFRSs, the requirements of the Companies Ordinance, 1984 or the directives issued by the SECP prevail.
The disclosures made in this condensed interim financial information have, however, been limited based on the requirements of International Accounting Standard 34: 'Interim Financial Reporting'. This condensed interim financial information does not include all the information and disclosures which are required in a full set of financial statements and should be read in conjunction with the annual published audited financial statements of the Company for the year ended June 30, 2019.
The preparation of this condensed interim financial information in conformity with the approved accounting standards requires the management to make estimates, judgments and assumptions that affect the reported amounts of assets and liabilities, income and expenses. It also requires the management to exercise judgment in the application of the accounting policies of the Company. The estimates, judgments and associated assumptions are based on historical experience and various other factors that are believed to be reasonable under the circumstances. These estimates and assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised if the revision affects only that period, or in the period of revision and future years if the revision affects both current and future periods.
This condensed interim financial information have been prepared under the historical cost convention except that obligations in respect of certain staff retirement benefits are carried at present value of defined benefit obligation less fair value of plan assets.
The accounting policies applied in the preparation of this condensed interim financial information are the same as those that were applied in the preparation of the annual published audited financial statements of the Company for the year ended June 30, 2019.
The significant estimates, judgments and assumptions made by management in applying the accounting policies and the key sources of estimation of uncertainty were the same as those that were applied to the financial statements of the Company as at and for the year ended June 30, 2019.
The financial risk management objectives and policies are consistent with those disclosed in the annual published audited financial statements of the Company for the year ended June 30, 2019.
The comparatives in the condensed interim statement of financial position presented in the condensed interim financial information as at September 30, 2019 have been extracted from the audited financial statements of the Company for the year ended June 30, 2019, whereas, the comparatives in the condensed interim statement of profit or loss account, condensed interim statement of comprehensive income, condensed interim statement of changes in equity and condensed interim cash flow statement have been extracted from the unaudited condensed interim financial information of the Company for the Quarter ended Sep 30, 2018.
This condensed interim financial information are measured using the currency of the primary economic environment in which the Company operates. These condensed interim financial information are presented in Pakistan Rupee, which is the Company's functional and presentation currency.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND USE OF ESTIMATES AND JUDGMENTS
12
3.4
3.5
Standards, Interpretations or Amendments
-------
IFRS 1 – First Time Adoption of International Financial Reporting Standards---
IFRS 14 – Regulatory Deferral AccountsIFRS 17 – Insurance Contracts
(Unaudited) (Audited)Note September June
30, 2019 30, 20194
4.1 336,428 350,998
PROPERTY, PLANT AND EQUIPMENT
Operating fixed assetsCapital work-in-progress 15,313 10,698
351,741 361,696
4.1 The following additions to and disposals of operating fixed assets have been made during the period:
Additions - 4,575 2,423 9,893 - 16,891
Disposals:- - (59) (4,806) - (4,865)Cost
Accumulated depreciation - - 59 1,971 - 2,030 - (2,835)
Building on leasehold
land
Plant and machinery
Furniture, fixtures and equipment
Vehicles Fork Lifter Total
Additions - 1,650 53 - - 1,703
Disposals:- - (29) - - (29)Cost
Accumulated depreciation - - 29 - - 29 - - - - - -
There are certain amended standards and interpretations that are mandatory for accounting periods beginning on or after July 1, 2019 but are not considered to be relevant or do not have any significant effect on the Company's operations and are, therefore, not detailed in this condensed interim financial information.
Effective date (accounting period
January 01, 2019January 01, 2019January 01, 2019
Standards, interpretations and amendments to published approved accounting standards that are effective in the current period
- - (2,835) -
------------------------ Quarter ended September 30, 2018 -----------------------
----------------------------------- Rupees in '000 -----------------------------------
New standards, interpretations and amendments to published accounting and reporting standards that are not yet effective in the current year
The following standards, amendments and interpretations with respect to approved accounting standards would be effective from the date mentioned below against the respective standards, amendments or interpretations:
The standards highlighted above may impact the financial statements of the Company on adoption. The Management is currently in the process of assessing the impact on the financial statements of the Company.
There are certain other new and amended standards, interpretations and amendments that are mandatory for the Company's accounting periods beginning on or after July 1, 2019 but are considered not to be relevant or will not have any significant effect on the Company's operations and are, therefore, not detailed in these financial statements.
January 01, 2019January 01, 2020January 01, 2020January 01, 2020
IFRS 16 'Leases'Amendments to IAS 28 'Investments in Associates and Joint Ventures'Amendments to IAS 19 ‘Employee Benefits’IFRIC 23 'Uncertainty over Income Tax Treatments'Amendments to References to the Conceptual Framework in IFRS StandardsAmendments to IFRS 3 ‘Business Combinations’Amendments to IAS 1 ‘Presentation of Financial Statements’ and IAS 8 ‘Accounting Policies, Changes in Accounting Estimates and Errors’.
'Other than the aforesaid standards, interpretations and amendments, the International Accounting Standards Board (IASB) has also issued the following standards which have not been adopted locally by the Securities and Exchange
Fork Lifter TotalPlant and machinery
------Rupees in '000------
------------------------ Quarter ended September 30, 2019 ------------------------Building on leasehold
land
Furniture, fixtures and equipment
Vehicles
----------------------------------- Rupees in '000 -----------------------------------
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(Unaudited) (Audited)Note September June
30, 2019 30, 20195 DEFERRED TAX ASSET - NET
Deferred tax asset - net 5.1 144,907 152,547
5.1
(Unaudited) (Audited)Note September June
30, 2019 30, 20196 SHORT-TERM LOAN FROM A RELATED PARTY - UNSECURED
Loan from Otsuka Pharmaceutical Factory, Inc. 6.1 543,300 557,588
6.1
(Unaudited) (Audited)September June
30, 2019 30, 20197 SHORT-TERM RUNNING FINANCE - SECURED Note
From banking companiesShort-term running finances utilised under mark-up
arrangements 7.1 532,594 583,669
7.1 Particulars of short-term running finance - secured
------Rupees in '000------
Mark-up is charged at Japanese LIBOR + 0.40% (2019: Japanese LIBOR + 0.40%) per annum and is payable semi-annually in arrears.
------Rupees in '000------
------Rupees in '000------
This represents foreign currency denominated loan obtained in three tranches of JPY 125 million each, drawn down on February 26, 2015, April 27, 2015 and July 27, 2015, repayable on or before February 25, 2016, April 26, 2016 and July 26, 2016 respectively. These were roll forwarded annually multiple times and are now repayable on or before February 25, 2020, April 26, 2020 and July 26, 2020 respectively.
The Company has not recognised deferred tax on minimum tax amounting to Rs. 67.082 million (June 30, 2019: Rs. 58.982 million).
(Unaudited) (Audited)Sept June
30, 2019 30, 2019
Citi Bank 765,000 1 months KIBOR + 0.50% p.a.
a) Registered Joint Pari-passu Hypothecationcharge on Current Assets for PKR 778 mln.
b) Registered Joint Pari-passu Hypothecationcharge on Fixed Assets of Plant & Machineryfor PKR 432 mln.
Quarterly March 31, 2020
364,287 398,712
Bank Alfalah Limited
185,000 3 months KIBOR + 2.00% p.a.
(a) Joint pari passu charge over stocks andreceivables of Rs 147 million registered with the SECP; (b) Joint pari passu charge over land andbuilding for Rs 51 million registered with theSECP; and(c) Joint pari passu charge over plant andmachinery of Rs 121million registered with theSECP.
Quarterly January 31, 2020
127,307 143,956
The Bank of Punjab
41,383 3 months KIBOR + 1.25% p.a.
(a) Registered Joint pari passu hypothecationcharge over stocks and receivables of Rs 24million.(b) Registered Joint Memorandum ConfirmingDeposit of Title Deeds (mortgage) charge over land and building for Rs 15 million.(c) Registered Joint pari passu hypothecationcharge over Fixed Assets of Rs 17 million.
Quarterly March 31, 2019 *
41,000 41,000
991,383 532,594 583,669
SecurityFrequency of mark-up
payment
Facilityexpiry date -----Rupees in '000-----
BankLimit in Rs '000'
Mark-up rate
* Under process of renewal.
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8 CONTINGENCIES AND COMMITMENTS
8.1
8.2
(Unaudited) (Audited)September 30, June 30,
Note 2019 2019
8.3 Commitments in respect of: - 2,469
10,328 51,359Capital expenditure contracted for but not incurredLetters of creditLetters of guarantee 62,069 48,886
Note
99.1 598,143 459,205
NET SALESSales (net of returns 0.258 million; 2018: Rs 9.199 million)Less: sales tax (6,287) (7,307)
591,856 451,898Less: discounts (57,752) (10,344)
534,104 441,554
9.1
On March 05, 2014, a notice of demand was served on the Company by the Additional Commissioner Inland Revenue (ACIR) for an amount of Rs 164.778 million (2019: Rs 164.778 million) under section 122 (5A) of the Income Tax Ordinance, 2001. The ACIR added back certain items such as exchange loss, claims against provisions and write-offs of inventory, discounts and rebates on sales and trade debts and disallowed finance cost in the income returned for tax year 2012. The Company filed an appeal with the Commissioner Inland Revenue (Appeals) [CIR(A)] who upheld the action of ACIR on certain items against which the Company filed an appeal before the Appellate Tribunal Inland Revenue (ATIR) to review the action of the CIR(A). On January 19, 2017 hearing of ATIR was held and on April 10, 2017 an order was served in which the decision of certain items was given in favour of the Company and certain items were remanded back to the ACIR for further examination.
Through the Finance Act, 2017, Section 5A of the Income Tax Ordinance, 2001 was amended. Through the revised provision a tax equal to 7.5 percent of accounting profit for the year will be levied on every public company, other than a scheduled bank and modaraba, if distribution of cash dividend or bonus shares of at least 40 percent of the accounting profit after tax for the year is not made. In this connection, the Company has filed a constitutional petition before the Honorable Sindh High Court on August 27, 2017 seeking a declaration and injunction therefrom against the Federation of Pakistan and others to suspend the aforementioned imposition of tax on undistributed profit of the Company and has been granted a stay order by the Honorable Sindh High Court in respect of levy of the above tax. Accordingly, based on a legal advice, provision amounting to Rs 14.713 million for the year ended June 30, 2017 has not been made in these financial statements in respect of the additional tax liability and the management expects a favourable outcome in this respect.
On December 28, 2017, an appeal effect order was passed by the ACIR under section 124/122(5A) of the Income Tax Ordinance, 2001. Through the said order (which is in context of the earlier decision by the ATIR dated April 10, 2017 mentioned above) a demand of Rs 21.408 million was determined. Furthermore, in respect of the matters decided by the ATIR in favour of the Company, the ACIR has filed an appeal in the High Court of Sindh and
The Company filed an appeal against the above order before the Commissioner Inland Revenue (Appeals-II) [CIR(A)] along with the stay application. Upon request, the CIR(A) acceded to grant stay against recovery till February 15, 2018. On April 13, 2018 an appeal effect order was passed by the ACIR under section 124/122(5A) of the Income Tax Ordinance, 2001 whereby relief has been allowed in respect of certain matters whereas disallowance has been maintained in respect of certain other matters. As a result a demand of Rs 12.699 million has been raised by the ACIR which has been settled by the Company during the current year under protest through adjustment of refund relating to the tax year 2015. As a matter of abundant caution, management has recorded a provision of Rs. 12.699 million with corresponding adjustment to refund liability to tax year 2015.
------Rupees in '000------
(Unaudited) (Unaudited)
September 30, September 30, 2019 2018
------Rupees in '000------
With regards to the previously reported hardship cases, as per orders passed by the Supreme Court of Pakistan, the Company was advised to re-submit their applications under new Drug Pricing Policy 2018 (DPP 2018) to Drug Regulatory Authority of Pakistan (DRAP).
These hardship cases concluded favorably in the light of DPP 2018 and formal notification of revised prices has also been issued by DRAP dated December 31, 2018.
15
10 TRANSACTIONS WITH RELATED PARTIES
Related parties include Otsuka Pharmaceutical Company Limited the holding company, associated companies /undertakings (namely Otsuka Pharmaceutical Factory Incorporation, Japan, Thai Otsuka Pharmaceutical Company Limited, Thailand, P.T. Otsuka Indonesia, Otsuka Pharmaceutical Company, Vietnam, Shanghai Microport Medical (Group) Company Limited, etc.), entities under common directorship namely Hospital Supply Corporation, Idrees Plastic, staff retirement funds and the key management personnel. Details of the transactions with the related parties and the balances with them as at year end other than those which have been disclosed else where are as follows:
The Company enters into transactions with related parties for the sale of its products, purchase of raw materials, finished goods and spare parts and for rendering of certain services. Sales to related parties represent sales made to Hospital Supply Corporation which is the sole distributor of the Company's products in the southern region. The Company allows discount to the distributor on trade price based on the agreed terms. Purchases from related parties primarily represent purchase of raw materials and finished goods from Otsuka group companies.
Key management personnel are those persons having authority and responsibility for planning, directing and controlling the activities of the Company. The Company considers all members of their management team, including the Chief Executive Officer and working directors to be its key management personnel.
There are no transactions with key management personnel other than those that are under their terms of employment and / or entitlements.
- 246,352 - - 246,352 206,957
8,762 25,538 - 200 34,500 73,213 - - 750 - 750 750 - - 17,741 - 17,741 15,746 - 909 - - 909 690 - - - 4,546 4,546 1820
- - - 2,914 2,914 2,772 - - - 2,158 2,158 2,063
Transactions during the periodNet sales (net of discounts allowed Rs. 7.705 million)Inventory purchasedConsultancy chargesRemuneration of the key management personnelMark-up expense on short-term loan from a related partyLate payment charges received from Hospital Supply CorporationCharge relating to staff provident fundCharge relating to staff gratuity fundPurchases from Hospital Supply Corporation - 222 - - 222 116
- 246,320 - - 246,320 177,412 - 116 - - 116 116 - 9,202 - - 9,202 2,934 - 7,410 - - 7,410 8,385 - 16,200 - - 16,200 38,048 - 362 - - 362 557,588 - 385 - -
385
- - - - 200 62 - 543,300 - - 543,300 557,588 - -
1,226 - 1,178 1,367
- - - 2,686 2,686 -
- - - 3,936 3,936 - - - - - - 4,9321 - - - 363 363 363
Balance outstanding as at the end of the period / yearReceivable from Hospital Supply Corporation against sale of goodsPayable to Hospital Supply CorporationPayable to Otsuka Pharmaceutical Company Limited, JapanPayable to Shanghai Microport EPMed Tech Co., LimitedPayable to Shanghai Microport Medical (Group) Company LimitedPayable to Otsuka Pharmaceutical Factory, Inc.Payable to Thai Otsuka Pharmaceutical Company Limited, ThailandDanish Enterprises(Idrees Plastic)Loan from Otsuka Pharmaceutical Factory, Inc.Advance from key management personnelPayable to Employees' Provident FundRecievable from Employees' Gratuity FundPayable to P.T. Otsuka IndonesiaPayable to ShareholderProvision for Workers' Profits Participation Fund - - -
2,377 328 -
Particulars
Total Parent company
Other associated
companies/undertakings
Key management
personnel
----------------------------------- Rupees in '000 ------------------------------------
----------------------------------- Rupees in '000 ------------------------------------
(Unaudited)Quarter ended September 30, 2019
(Unaudited) Quarter ended
September 30, 2018
Total
(Audited) June 30,
2019 Other related parties
ParticularsParent
company
Other associated
companies / undertakings
Key management
personnel
Other related parties
(Unaudited)Quarter ended September 30, 2019
5,062
16
11
September June30, 2019 30, 2019
4,991 10,975Bank balancesShort-term running finance utilised under mark-up arrangements (532,594) (583,669)
(527,603) (572,694)
12 SEGMENT INFORMATION
12.1 This condensed interim financial information has been prepared on the basis of a single reportable segment.
12.2
12.3 The geographic segmentation of sales is as follows:
Pakistan 98.48 98.43Afghanistan 1.52 1.57
12.4
12.5 All non-current assets of the Company as at September 30, 2019 are located in Pakistan.
13 FAIR VALUE MEASUREMENT
Fair value hierarchy
-
-
-
Underlying the definition of fair value is the presumption that the Company is a going concern without any intention or requirement to curtail materially the scale of its operations or to undertake a transaction on adverse terms.
IFRS 13 'Fair value Measurement' defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Underlying the definition of fair value is the presumption that the Company is a going concern without any intention or requirement to curtail materially the scale of its operations or to undertake a transaction on adverse terms.
As at Sep 30, 2019 and June 30, 2019, the Company did not have any assets or liabilities which were measured at fair value using any of the aforementioned valuation techniques.
International Financial Reporting Standard 13, 'Fair Value Measurement' requires the Company to classify assets using a fair value hierarchy that reflects the significance of inputs used in making the measurements. The fair value hierarchy has the following levels:
quoted prices (unadjusted) in active markets for identical assets or
input other than quoted prices included within level 1 that are observable for the asset or liability, either directly (i.e. as
prices) or indirectly (i.e. derived from prices) (level 2); and
inputs for the asset or liability that are not based on observable market data (i.e. unobservable inputs) (level 3).
Sales to Hospital Supply Corporation (a related party of the Company) which is the sole distributor in the southern region was around 47.03 percent during the period ended Sep 30, 2019 (Sep 30, 2018: 46.87 percent).
----Rupees in '000----
(Unaudited) (Unaudited)September September
30, 2019 30, 2018------- In percent -------
Sales from Intravenous Solutions represent 83.88 percent while sales from others represent 16.12 percent (Sep 30,2018: 80.88 percent and 19.12 percent) respectively of the total sales of the Company.
CASH AND CASH EQUIVALENTS
Cash and cash equivalents included in the condensed interim cash flow statement comprise the following items included in the
condensed interim balance sheet:
(Unaudited) (Audited)
17
14
15 DATE OF AUTHORISATION FOR ISSUE
16 GENERAL
Figures in this condensed interim financial information have been rounded off to the nearest thousand rupees unless otherwise stated.
This condensed interim financial information was authorised for issue on October 22, 2019 by the Board of Directors of the Company.
CORRESPONDING FIGURES
Corresponding figures have been rearranged and reclassified wherever necessary for the purpose of comparison and better
presentation. There were no major reclassifications in this condensed interim financial information during the current period.
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